One More Time: Tesla Versus Dealer Association, Texas Style

4 years ago by Jay Cole 16

Tesla's Houston "Store," Where You Can't Buy, Sell, Repair, Or Even Find Out The Price Of A New Model S

Tesla’s Houston “Store,” Where You Can’t Buy, Sell, Repair, Or Even Find Out The Price Of A New Model S

Apparently, a legal battle must be waged in every state Tesla wants to open one of their boutique showrooms in.

Next up?  Texas.

So far, the legal battles have gone fairly well, as Tesla is sporting a perfect 3 and 0 record when fighting various state’s dealership associations for the right to open boutique shops, as well as to sell and service the car separately in the state.   (herehere, and here)

Tesla's Dealership In Massachusetts Which Opened In September Amidst Dealer Association Protests, Remains Open Today

Tesla’s Dealership In Massachusetts Which Opened In September Amidst Dealer Association Protests, Remains Open Today

This time however, it is a little different, as Tesla is the one looking to change existing franchise laws in Texas, as opposed to blocking new ones, or interpreting old ones.

Specifically, Tesla has introduced bills this month in the Texas Legislature seeking exemptions for electric vehicle makers (who have never had franchisees) to super-cede current restrictions on factory-owned dealerships.

And if that doesn’t sound like a tough enough thing to pass by itself, the Texas Automotive Dealer Association is working as hard as they can to make sure the exemption never happens.

In a piece on the subject with the Automotive News, one company executive calls the proposed change “perhaps the highest barriers in the nation to operating”  Tesla’s factory-store model.

How Much For The Model S Over There?  Sorry, Can't Tell You That

How Much For The Model S Over There? Sorry, Can’t Tell You That

And according to Diarmuid O’Connell, who is Tesla’s VP of business development, operating in Texas is “expensive, time consuming…and just ridiculous.”

O’Connell says that although Tesla has two boutique locations in Texas already (Houston and Austin), employees can’t participate in any selling activities, they can’t make a sale, or even give out pricing on any Tesla products.

And if a person in Texas does decide to purchase an all electric Model S sedan, they must contact an out-of-state Tesla representative themselves, and even then, Tesla is not legally permitted to ship the car into the state.  The customer is on their own.

Further complicating matters after the sale, if your Tesla vehicle has an issue, Tesla can not legally make an “in warranty” repair…so the customer has to either pay for the repair out of pocket, or drag the car to the next available Tesla service center outside of the state.

“It’s a really, really twisted kind of thing,” said O’Connell, “It’s very hard for Texas folks to acquire a Tesla, ridiculously  hard, I think.”

The Texas dealership association has their own opinions why Tesla should not be allowed to sell or service cars in Texas:

“The best way for any manufacturer to retail their vehicles is through great  dealers.  They’re the  ones who know how to retail, who know how to satisfy the customers, and they’re  the ones who should be selling the product…To think you should have an exception because you have one electric vehicle is  arrogant,” while adding that other OEMs have been working on EVs “for a long time.”

Like changes to legislation in Minnesota sought by that state’s dealership association to block Tesla, experts believe Tesla’s proposal to allow the company to sell EVs in Texas themselves, will also fail.

Proving that keeping the status quo is always the path of least resistance.

Automotive News (sub)

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16 responses to "One More Time: Tesla Versus Dealer Association, Texas Style"

  1. David Mirray says:

    I just visited the Houston store yesterday. I drove there from Dallas. I bought a shirt and got to sit in the Model-S for the first time.

  2. These franchise laws are just so ridiculous. Do the people of Texas benefit from this? They don’t have access to a product that everyone else does and if they do buy one they can’t have it serviced under warranty in the State they live in? How does that serve the people?

      1. James says:

        Texans should revolt.

  3. Nelson says:

    I don’t think the Texas restrictions are Tesla’s war to fight. If I were Elon I would refuse to sell any Model S to Texas residents unless the laws are changed. Let the residents of Texas fight this battle against the Texas Automotive Dealer Association themselves. If they want to be the only State where the residents are not free to buy the car they want then they are the ones who look foolish. Their new State motto could be “Texas – the State where freedom has restrictions”.

    NPNS!
    Volt#671

    1. James says:

      Exactly. Texans need to take this to their public “servants”. Can
      car dealers grease the palms of enough legislators to keep these
      inane laws on the books?

      It’s about human liberty. Who should dictate how you or I can buy a car
      in these free United States of America?!

      As other cases in other states have proven – Tesla’s business model does not
      infringe on local independent dealer’s rights, as THERE ARE NO OTHER
      TESLA DEALERS to infringe upon.

      In the ’90s many independent dealers opted to experiment with a Saturn-esque
      sales model: No dicker sticker – price listed on vehicle is asking price – period.I
      I think this model needed more adoption to flourish, but the “camel-trading”
      custom of secret prices and deceptive tactics is a thing of the past. Educated
      consumers use the internet and many resources to determine fair price,
      yet dealers still prey on the uninitiated and try to proceed as usual.

      Time has come for change – and leave it to Tesla to change the auto
      sales model altogether.

      Perhaps Texas or a case like this will make it to the Supreme Court,
      and make this expensive state-by-state legal warring unnecessary.

      1. Jim says:

        Public servants???? In a legislature??? bwahahahahaha they are servants to the lobbies, not the public!!!

  4. Kickincanada says:

    I shake my head. America land of capitalism and the free market and there are laws on the books would be more at home in countries of the past which sought to limit competition. Tesla and other car makers should be free to pursue whatever retail or marketing model they want. It’s just ridiculous!

  5. kdawg says:

    “The best way for any manufacturer to retail their vehicles is through great dealers. They’re the ones who know how to retail, who know how to satisfy the customers, and they’re the ones who should be selling the product…To think you should have an exception because you have one electric vehicle is arrogant.”
    ———————

    I think the arrogant statement is saying the “best” way to sell something is through “great” dealers. That is their opinion, nothing more. All options should be available to consumers, regardless of the opinion a group of dealers trying to protect their monopoly.

  6. Roy_H says:

    I wish this site had thumbs up and thumbs down voting.

    Tesla has one other asset that just might help the legislation to pass. Elon Musk wants to open a spaceport in Brownsville Texas and has been trying to get Texas to pay for infrastructure like roads, water, sewer, power and possibly more incentives. This represents a huge new business opportunity for Texas that will eventually employ thousands of people, and I think they would be foolish to let it go to another state. So the legislature has already personally met with Elon Musk, and (I would think) in a very positive way. If they feel good about him bringing a big business to Texas, maybe they will feel more positive about his exemption request for EV manufacturers.

    An exemption just for EV manufactures, is of course, odd in its own right. The law dis-allowing auto manufactures to sell directly should be struck down altogether, but by just asking for EV manufactures they are hoping that there will be less opposition from the Auto Dealers Association. Or at least less grounds for them to fight on.

  7. Koz says:

    “Times, they are a’changin”

    4-0 for Tesla.

    Those are antiquated laws meant to protect invested dealers from the potentially unsavory protactices of their franchising manufacturers. Not applicable to Tesla and not upholdable in court, IMO.

  8. Independent Observer says:

    The only problem I have with this, is the statement, “Tesla introduced bills….” I don’t think any company at all should be writing bills and putting them through the legislature. I am not naive, I know it is done all the time. Does not make it right.

    Yes I get the fact that these Franchise laws are crazy. Like most legislation, they were born at a time when they were needed. I can see the point of Dealers and other manufacturers, they had to play by a certain set of rules and invested millions of dollars. Now somebody else gets to play with another set of rules. Does this mean, Ford, GM, etc can dump dealers and set up their own places? And of course will they set up places in ND, SD, MT, WY?

    1. James says:

      You are missing the point. How can an association of businesses dictate
      how a type of product is sold?

      If a manufacturer were to set up factory-direct sales in malls or anywhere
      that created a conflict of interest – it is indeed against laws. These laws
      on the books in Texas seem to control how cars are sold into a very
      narrow window giving auto dealers a kind of monopoly over how the
      consumer can purchase a good.

      Electronics, including cellphones have many ways in which to be
      purchased. You can buy them outright and buy cell service seperately,
      or you can enter into contracts as in several other consumer service
      industries like satellite or cable television. Every day there seems to
      be more experiments as to how to obtain these products. Should
      there be state laws that limit consumer choices? Is that American?
      Where is the liberty and justice for all in that?

      Established independent franchise dealers and huge auto
      corporations have invested in these established sales mechanisms and
      I understand they feel challenged. Those companies should feel free
      to open showrooms in malls and not sell their product there also. Model S
      buyers are not going to service their electric car at a GM dealer – so there
      is no taking away of high profit service department gains there.

      Thank all that is good that Tesla is shaking up the car buying experience
      and giving people options as to how they do business.

    2. evnow says:

      “Does this mean, Ford, GM, etc can dump dealers and set up their own places?”
      Yes, why not ?

      “And of course will they set up places in ND, SD, MT, WY?”
      If they don’t, it is a loss in sales for them.

      If there were no restrictions – you would have the kind of thing that happens with computers. Apple & Microsoft have their own stores – but you can also buy from Best Buy or Staples or Online.

      Either we are a free country, or we are not 😉